Nemaska up 38% on investment LOI

Nemaska Lithium Inc. [NMX-TSX; NMKEF-OTCQX, NOT-FSEt] said Friday July 19 that it has received and accepted a letter of intent from The Pallinghurst Group, that contains a $600 million equity proposal from The Pallinghurst Group.

Proceeds would be used to finance Nemaska’s Whabouchi lithium project in Quebec, which includes a mine and electrochemical plant.

Nemaska said Pallinghurst is a United Kingdom-based global metals and mining industry investor. The LOI contemplates a $200 million private placement at 25 cents a share and a stand-by purchase agreement to fully guarantee the successful completion of a rights offering of up to $400 million at the same issue price.

Pallinghurst and Nemaska have agreed to a three-month exclusivity period to allow for the finalization of definitive agreements and completion of Pallinghurst’s due diligence.

Nemaska shares jumped 38.6% or $0.085 to 30.5 cents on heavy volume of almost 10 million. The shares are trading in a 52-week range of 21.5 cents and 94 cents.

“The Nemaska Lithium investment is in line with Pallinghurst’s desire to focus exclusively on the supply of critical battery and fuel-cell related materials,” said Arne H. Frandsen, co-founder and Managing Partner of Pallinghurst.

Nemaska is aiming to become a leading supplier of lithium hydroxide and lithium carbonate to the consumer and automotive lithium-ion battery market.

In doing so, it hopes to capitalize on expected growth in lithium demand which analysts say will be driven by the white metal’s key role in the production of batteries used to manufacture electric vehicles.

Over 60% of current lithium demand comes from industrial applications, such as glass, ceramics, lubricants and casting powders.

But forecasts of rising adoption rates in the electric vehicle sector and the development of huge battery factories by Tesla Motors Ltd. [TSLA-NASDAQ] and others caused lithium prices to more than double in 2016 and 2017.

More recently, lithium prices have retreated from previous highs as some miners ramp up their production.

For its part, Nemaska plans to mine lithium contained in the hardrock mineral spodumene, initially from an open pit operation at Whabouchi.

Concentrates produced at the mine site will be shipped to a hydrometallurgical plant in Shawinigan, Quebec, and converted into lithium hydroxide and lithium carbonate.

Back in May, 2018, the company said it had raised $1.1 billion for the project, following the closing of a $280 million bought deal offering, an $80 million private placement, and a US$350 million bond offering.

The company has said it hopes to initiate the commissioning of the Whabouchi Mine by the second half of 2019 and start commissioning the Shawinigan electrochemical plant during the first half of 2020.

An updated Whabouchi feasibility study announced in January 2018 encompasses a combined open pit and underground mine operation, concentration facilities, tailings and water management at the mine site as well as the hydrometallurgical processing facility in Shawinigan.

The feasibility study foresees a total initial capital cost of CAD$801 million, average life-of-mine revenue of $581 million per year, and live of mine production of 7 million tonnes of spodumene concentrate. That material would be converted to 770,000 tonnes of battery-grade lithium hydroxide and approximately 361,000 tonnes of battery-grade lithium carbonate. The estimated mine life is 33 years.

The study foresees annual average production of 213,000 tonnes of concentrates, generating 23,000 tonnes of lithium hydroxide and roughly 11,000 tonnes of lithium carbonate.